Regulatory complexity is increasing. Fraud threats are changing more rapidly than ever before. And legacy compliance infrastructure—remain based on stagnant audits, spreadsheets, and siloed checklists—isn’t keeping pace.
As McKinsey’s 2023 RegTech report states, forward-thinking companies are now no longer waiting for regulatory requirements to respond—they’re implementing technologies that facilitate ongoing, real-time compliance. AI-powered systems are assisting businesses in lowering compliance costs by up to 30–50%, but also hugely enhancing speed, accuracy, and scalability.
This transformation is not occurring in a vacuum. It’s transforming industries across the board—ranging from banking and fintech to insurance, HR technology, and healthcare. Whether it’s processing onboarding in seconds or identifying nascent fraud patterns in real time, AI-driven RegTech is becoming the driving force behind governance and risk management today.
This post delves into how RegTech is changing, why AI is at the center, and what the new frontier will be for companies willing to view compliance as a competitive advantage, rather than a checkbox.
What Exactly Is AI-Powered RegTech?
Let’s break it down.
RegTech is technology that enables businesses to comply with regulations in a more efficient way. AI-driven RegTech builds on this by automating, augmenting, and adjusting compliance processes in real-time. No longer need businesses play catch-up but instead remain one step ahead, with systems that learn, predict, and respond quicker than any human process ever could.
Here are some ways AI is transforming RegTech:
Identity Verification
Consider facial recognition, OCR-based document scanning, Aadhaar masking, or even deepfake detection. These AI applications help companies know who they’re actually transacting with, minimizing fraud risks at the point of entry.
Continuous Monitoring
Why wait for quarterly audits when continuous KYC (Know Your Customer) and KYB (Know Your Business) monitoring can identify risks on the spot?
Behavioral Risk Detection
Machine learning algorithms assess patterns of behavior—highlighting abnormal activity that can signal insider threats, fraud, or non-compliant conduct prior to harm.
Natural Language Processing (NLP)
The AI reads thousands of pages of fresh rules and aligns them to your policies in-house. Rather than legal teams racing to make sense of updates, the system highlights what’s most important, in an instant.
The RegTech Surge: A Global Movement
We’re not talking about a handful of startups testing ideas in isolated labs. RegTech is now a fast-growing global industry. According to a 2024 GlobeNewswire report, the global market for AI in RegTech is projected to reach USD 6.64 billion by 2028, growing at a CAGR of over 20%.
Why the surge?
- Increasingly complex and region-specific regulations
- An explosion of digital identities and transactions
- ️ Higher scrutiny from regulators
Demand for faster onboarding and lower fraud exposure
Even in India, frameworks like the Digital Personal Data Protection (DPDP) Act, RBI’s digital KYC mandates, and SEBI’s tightening compliance expectations are nudging companies to rethink their outdated compliance architectures.
Read: Answering the Most Common Questions on Instant Verification APIs in KYC & KYB
Why AI Is a Game-Changer in Compliance
RegTech isn’t just about ticking checkboxes faster. It’s about reimagining compliance as a strategic engine—something that builds trust, unlocks new markets, and helps avoid operational bottlenecks.
Here’s what makes AI such a transformative force in this space:
Speed & Scale
What once took days—like verifying identities or checking compliance records—can now happen in seconds, across millions of users or transactions.
️Proactive Fraud Detection
AI models trained on historic data can spot anomalies, predict fraud attempts, and prevent losses—before they happen.
Continuous Compliance
Forget annual audits. With AI-driven monitoring, compliance becomes always-on. You’re audit-ready, all the time.
Explainability (XAI)
One of the largest reservations about AI in compliance was transparency. But today, Explainable AI (XAI) makes it possible for users and regulators to see why decisions were made—gaining confidence and legal defensibility.
Cross-Border Intelligence
For businesses with operations globally, AI makes it possible to translate and enforce region-specific laws seamlessly—without creating chaos across jurisdictions.
The RegTech revolution isn’t grinding to a halt. It’s changing. The next frontier is already in the making—and here’s what awaits us:
GenAI Copilots for Compliance Officers
These AI copilots won’t merely bring up regulations—they’ll decipher laws, analyze compliance gaps, and recommend real-time policy revisions. Imagine them as the ChatGPTs of your legal team.
Federated Learning Models
Financial institutions and businesses can now share risk and fraud models—without exchanging personal information. This results in more effective fraud detection, with enhanced data privacy.
Unified Compliance Dashboards
Conceive a single dashboard that informs your compliance staff what requires attention—by country, regulation, or risk type. Such dashboards are fast becoming typical for large, international companies.
Real-Time Transaction Monitoring
Instead of sending alerts in batches (which will be too late), next-gen platforms highlight risky activities as they happen—from anomalous login patterns to transaction-level risks.
Singapore’s Monetary Authority (MAS) has already set the tone for this path, sponsoring regulatory sandboxes and AI-fueled pilots that are now being replicated in the U.S., U.K., and India.
AI-Powered RegTech in Action: Industry Use Cases
Let’s get more real. Here’s how different industries are using RegTech today:
Fintech & Banking
- Real-time vendor onboarding using KYB
- AML (Anti-Money Laundering) compliance and payment fraud detection
- Credit underwriting with AI-driven behavioral insights
️ Insurance
- Document analysis and cross-verification for claims validation
- Fraud pattern identification in health and auto insurance
- Policyholder background checks for onboarding and renewals
Human Resources
- Ongoing employee verification
- Monitoring of credentials and certifications
- Regulatory alignment with changing labor laws, particularly in gig and remote work
Healthcare
- License and registration verification for practitioners
- Real-time monitoring of adverse events
- Consent-based tracking of patient identity and data access
From Compliance to Competitive Advantage
Here’s the actual kicker: Companies embracing RegTech early aren’t merely staying away from fines. They’re gaining strategic advantage.
- Faster onboarding = improved customer experiences
- Fewer compliance failures = stronger brand reputation
- Real-time insights = faster business decisions
- Lower manual workload = leaner ops teams
In other words, RegTech is not simply a cost center. It’s a growth enabler.
Those that still regard compliance as a box to be ticked will be left behind by nimble competitors who regard it as a trust engine.
India’s RegTech Moment: A Timely Shift
With a fast-growing digitizing economy, India is well placed to drive the RegTech wave.
Solutions such as Gridlines by OnGrid already assist businesses with automating digital KYC, employment verifications, and document screening—while remaining compliant with RBI and DPDP regulations. With the heavy work being done by AI, startups and enterprises are already slashing onboarding time, minimizing fraud exposure, and remaining audit-ready—all without having to scale up with huge ops teams.
The writing’s on the wall: the future of compliance is already upon us, and India’s not behind—it’s leapfrogging.
Final Thought: Compliance Isn’t a Hindrance, It’s a Driver
Regulatory pressure is here to stay. If anything, it’s only going to become more sophisticated, more place-based, and more rigorous. But with the right RegTech stack fueled by artificial intelligence, companies can turn this trend on its head.
Compliance is no longer just about penalty avoidance. It’s about trust engineering at scale, bringing products faster to market, and tapping into markets overseas without getting bogged down in red tape.
The question is no longer “Can we afford to invest in RegTech?”
It’s “Can we afford not to?”
Leave a Reply